Now many banking services are moving online, mortgage is not an exception. A few years ago, banks had the main influence on the development of the credit industry, today startups have joined this process. According to the consulting company EY, fintech is the second most popular area in Russia in the field of technology projects. We will tell in this article, how such projects help to develop a credit culture and stimulate the technological development of the industry.
Credit Processing Process
Traditionally, the borrower has numerous obstacles at the stage of applying for a loan. You need to submit an application, collect documents, undergo underwriting, various checks and assessments, get approval from the bank and only then close the deal. In addition to the borrower and the bank, other players can also participate in the process: broker, insurance company, assessor, etc. This often takes a lot of time and effort from the user.
Despite the development of technologies, banks themselves do not seek to simplify significantly and automate the system of mortgage and refinancing — as in any complex corporate structures, the introduction of new products in banks requires a significant amount of time and money. Therefore, a free niche here is covered by fintech startups, which are more mobile, so that it is easier for them to create and market independent solutions that meet the needs of customers.
Among the most promising areas in the field of mortgage digitalization there are:
• Next level digitalization
Fintech seeks to automate processes that require routine work. For example, today the document circulation and submission of applications to banks have completely switched to digital format. This allows not only to minimize the influence of the human factor, but also to free up the time of specialists, for more priority tasks that require live communication, for example, consulting clients and resolving difficult situations. For example, the Australian online platform LoanDolphin brings together banks and brokers. It is enough to enter the desired conditions, and then the service itself will select the appropriate offers from all those presented on the market, the user has to choose the most profitable one. Everything else will be issued by the lender. The project earns commissions from brokers and banks. Since 2016, loans totaling $800 million have been issued through the Australian platform.
• Data analysis
The implementation of data analysis allows borrowers to reduce significantly the length of the transaction and the likelihood of refusal. With it, some services before sending documents to the bank conduct a preliminary calculation of the probability of approval. This is done using the input data and parameters of the borrower, as well as early experience in issuing mortgages or refinancing other users. For example, the Russian mortgage management service Refin.Online has a built-in analytics system that allows you to provide the client with those options that are most likely to approve the procedure. It also helps the service identify the “weaknesses” of the borrower (for example, a low level of real income or high borrowing). This helps eliminate them in a timely manner to increase the chance of approval.
• Improved user experience
Today, fintech seeks to make the mortgage industry more accessible and understandable to everyone, including inexperienced users. Services are trying to facilitate the mortgage and refinancing process by creating a phased algorithm, with some steps fully automated. Security is also of great importance — it is a priority in the field of fintech and the basis of trust relations between the user and the service. Each startup tries to give its product the most effective data protection system in order to gain a competitive advantage against the background of other market players. For example, the American service Inflooens develops user experience (along with the expansion of functions). The company strives to expand the capabilities of both digital self-service and consulting customers at any time.
• Improved document handling
Startups are striving to make their product a connecting bridge between other organizations that participate in the execution of a mortgage transaction. This will allow to combine the entire array of data required when making a mortgage or refinancing in one place. Already today, many services have access to the financial and credit history of borrowers, allowing users to collect the necessary package of documents much faster. For example, Molo startup from the UK collects independently a package of necessary documents for issuing a mortgage or refinancing. This is done through partnerships with other entities that are also involved in the collection and submission phase.
Startups are trying to combine several functions at once. Today, with the help of mortgage management services, the borrower is able, while resting at home, not only to pick up a bank and send documents, but also to pick up insurance, to order a real estate valuation, etc. This allows to combine all the necessary steps for the registration and refinancing of mortgages in one place and significantly reduce the duration of the procedure by several times. For example, the Russian online supermarket “Banki.ru” is a showcase not only of banks and mortgage lending programs, but also of insurance companies. With the help of one service, the user can select and arrange everything necessary for the transaction.
Despite rapidly evolving technologies, many transactions still cannot go digital. This is largely due to the difficulty of quickly adapting the legal component to new market demands. Also, in the market there remains a high level of distrust of customers in digital transactions. Borrowers often have questions about the security of data and documents that they send to the intermediary. At the same time, according to Refin.Online, the main source of trust for 63% of the audience is a bank that recommends a new service.
At the same time, the digitalization of mortgages and banking services in general is a trend that cannot be denied. The new era of mortgage loans will begin after borrowers have the opportunity to conduct mortgage transactions “from A to Z” remotely. This will make it possible not to visit the office, save time and reduce the barriers of choice and switching between banks. For example, when refinancing mortgages with the help of special online services (Refin.Online, “Banki.ru,” etc.), borrowers will be able in the new conditions to adapt quickly the rate and loan conditions to their financial capabilities. In the future, the management of mortgage products will become as clear and convenient as the management of mobile tariffs.
By Mikhail Chernov, CEO of Refin.Online online mortgage management service